What’s the story?
Boris Johnson used his keynote speech at the (virtual) Conservative Party conference today to announce that offshore wind will power “every home in the country” by 2030.
It’s part of a “green industrial revolution” that will apparently create “hundreds of thousands, if not millions of jobs” while helping the UK hit its target of net zero carbon emissions by 2050.
Is this news?
Not entirely. Some targets announced today are new, like the plan to generate 1GW of energy from floating wind farms (turbines mounted on floating platforms can be used in deeper water).
So today’s speech confirms a pledge already made, but it comes at a time when the coronavirus pandemic has put other long-term spending projects in doubt.
Is the 40GW target feasible?
Analysts say reaching that kind of capacity in ten years will require tens of billions of investment, and the government has only announced £160m of extra spending today.
That sum is relatively small, certainly compared to state-funded infrastructure projects like roads, in which the government says it plans to plough £27bn.
But the government has made it clear it expects most offshore wind investment to come from the private sector, backed by a risk-sharing scheme called Contracts for Difference.
The Global Wind Energy Council says the UK target of 40GW is “ambitious” but confirms that this country is still the world market leader for offshore wind, calling it a “monumental success story for the UK”. The trade association says other countries like Poland are copying the UK’s Contracts for Difference funding model.
So how much is the government really spending?
Contracts for Difference is the main way the UK supports low carbon electricity industry. The government agrees to pay electricity generators a fixed price over 15 years, instead of the wholesale electricity prices set by the open market.
It’s a way of ensuring companies with high upfront costs can invest in new technology with a guaranteed future income. It should also mean consumers won’t suddenly see their fuel bills rise if market prices rise higher than the price agreed with the government.
But of course, if the market price for electricity turns out to be lower than the price fixed in advance by the government, the government tops up the companies’ revenue.
The government said today that the UK will double its capacity for state-backed Contracts for Difference.
This obviously means it’s possible that the government could be on the hook for more than the £160m of spending announced today, depending on what happens to electricity prices.
Other experts have predicted that market prices could go so low that electricity suppliers end up paying the government via this scheme – a potential situation dubbed “negative subsidy”.
A spokesman for the Department for Business, Energy and Industrial Strategy (BEIS) told FactCheck that prices agreed between government and suppliers have fallen by around two-thirds since 2015.
He added: “The cost of deploying 40GW of offshore wind by 2030 will of course depend on the extent of further price reductions in the offshore wind sector.
“A more ambitious deployment of offshore wind could increase the costs of the CfD scheme, but because offshore wind projects can also sell electricity to the market at lower prices reducing overall electricity prices, any net impact on consumer bills will be significantly smaller.”
How many jobs will be created?
The Prime Minister referred to the potential for “millions” of jobs to be created in Britain as part of a broader push for more green energy, but it’s not yet clear how big a role offshore wind will play in this.
The government says today’s announcement will create 2,000 construction jobs and “enable the sector to support up to 60,000 jobs directly and indirectly by 2030 in ports, factories and the supply chains”.
Historically, renewable energy has failed to boost jobs in British manufacturing because firms tend to use cheaper overseas companies to make the equipment.
The Mail quotes an unnamed source as saying that the government will impose rules on UK manufacturers so that 60 per cent of offshore wind equipment is made in Britain, but we haven’t seen any assurances given on the record about this.
A BEIS spokesman told us: “Many offshore wind components are large, and need to be made relatively close to their deployment locations.
“The UK has a strong manufacturing heritage, and by creating new large scale portside manufacturing hubs, the new funding will make the UK sector ever more competitive – helping it play a full role in the delivery of 40GW by 2030, and creating and retaining high quality jobs here in the UK.”
Patrick Worrall and Simon Roach